It has been a long, tough road for most in the metals world, as we find ourselves approaching the lows yet again.  Many are hoping upon hope that those lows will finally hold.  Unfortunately, if “hope” has been your investing methodology of choice for the last 3+ years in the metals world, my heart goes out to you.  It truly has been quite painful for those that have viewed each rally as the start of the next bullish trend, only to have those “hopes” dashed with further lows being struck.  When will it all end?

Well, as we have been correctly following this pattern down all year, we may see it end in December.  The only question is if the market now seizes upon the opportunity presented to it in the upcoming weeks to strike our final lows, or if it is going to whipsaw everyone with a larger degree 4^th wave, and delay those lows until 2015.

We all have seen many calls this past week for much higher levels in the metals throughout the metals market.  And, even I attempted a long-side day-trade on Wednesday.  But, after reviewing the bigger picture charts, which showed how much resistance we had above us, I noted in the Trading Room that I aborted that day trade, especially when the market did not react to the upside by mid-day.

As I pointed out in the Wave Alerts and Market Updates I sent out this past week, we have attained the targets we set for ourselves before this rally began earlier in November.  After striking the 109 target we set for the last degree wave iii, and setting our targets for wave iv, silver, GLD and GDX have all reached their respective targets.  Furthermore, I also noted that silver had stopped just below its 50DMA and upper Bollinger Band on my daily futures chart.

In fact, on Thursday, I noted in a Wave Alert that the “micro structure on silver has me a bit concerned here and the downside may commence soon.”

So, with the market turning down from this resistance region, we are looking for 5 waves down to signal that wave V has begun.  For now, the best count has only 3 waves down completed.  Therefore, we would like to see a micro consolidation, and then a lower low on Monday or Tuesday to mark 5 waves down, and the conclusion of wave 1 of V. Ideally, silver should not rise above 16 and GLD above 114 for this 4^th wave consolidation.  An impulsive pattern through those regions in the upcoming week will put me on high alert for the alternative count to take us higher in a bigger 4^th wave.

But, as long as we complete 5 waves down, then I will be looking for the wave 2 retrace into next week to set up aggressive short positions into December.

Alternatively, as you can see on the chart, I have a b-wave bottom in place as of the close on Friday.  While this is clearly not my expectation at this time, I do have to keep this potential in the back of my mind.  If the GLD should take out 114, with silver going over 16, in an impulsive fashion before we complete 5 waves down, then I will take this potential much more seriously.  Until such time, I am going to expect the market to set up in a 1-2 pattern to take us to new lows into the middle to end of December.

As for downside targets, well, nothing has really changed for me in GLD.  I have had a target of 95-105 for quite some time, and have no reason to change that expectation at this time.  As far as silver, if this wave 1 down does approach the prior lows, then we could even see a 12 handle as a potential target for this wave V.  So, I have slightly adjusted our target region, as the lower wave 1 drops, the more likely the lower end of that target becomes.

And, as far as GDX, if this is only the first wave down in its 5^th wave down, well, let’s say GDX may see a low that can be a little lower in price than silver.  Let’s see how this pattern sets up in the coming week, at which time, we can set more accurate targets for downside follow-through.  And, yes, I believe those targets could be the buying opportunity of a lifetime.

Silver 144 minutes 

GLD Daily

GDX